Japan still lacks a culture of shareholder activism but that may change as it tries to keep up with rapid shifts in the global financial environment, European Commissioner Charlie McCreevy said on Wednesday.

The Tokyo Stock Exchange is likely well aware of the need to change regulatory structures and draw more investors to meet competition from Asian bourses, McCreevy said.

I am loath to say what Japan should do because the culture here has been very, very against any type of (shareholder) activism, McCreevy told Reuters.

But as Japan opens up its markets over time ... I think there is an inevitability that some type of semi-European or semi-U.S. kind of philosophy will take place here as well.

McCreevy is visiting Japan to meet government officials, including Financial Services Minister Yuji Yamamoto, to build on financial regulatory ties and exchange views on financial services reform. He is scheduled to visit the Tokyo Stock Exchange, Asia's largest bourse, on Thursday.

Japanese firms have traditionally been averse to mergers and acquisitions but have seen a growing wave of shareholder activism, with funds such as Steel Partners and Dalton Investments building up stakes in what some see as undervalued companies and pushing management to change.

After an internal tussle, Japanese digital camera and optical lens maker Pentax Corp. accepted a tender offer last month from high-tech glass maker Hoya Corp., largely due to mounting pressure from its shareholder Sparx Asset Management, a Tokyo-based investment fund, to do so.


McCreevy, the commissioner in charge of the EU's internal market and services, said the question of shareholder activism has been a contentious issue even within the 27-nation bloc, with member countries having differences in views.

How Japan deals with the growing presence of shareholder activism is entirely up to its authorities, McCreevy said.

But if it does (open up markets more), my main job as European commissioner is to ensure that European companies are not discriminated against when operating in Japan, he said.

Japan, the world's second-biggest economy, lags far behind rivals in global equity trading volume, accounting for a mere 9 percent, hurt by high taxes and opaque regulations.

Late to join a global scramble among exchanges to form partnerships, the TSE signed an agreement in January to share technology with both New York's NYSE Group and the London Stock Exchange.

On accounting system changes, McCreevy said he was confident that Japan would meet the 2009 deadline for converging its accounting rules to those of the International Financial Reporting Standards used by 100 countries, including the EU's 27.

Japan has quite a good record in dealing with the timelines, McCreevy said. He was pretty confident that the EU and Japan would succeed in ironing out differences in accounting rules, he said.

The EU's Executive Commission needs to decide by the end of 2008 whether accounting rules in third countries are equivalent to IFRS.

Unless the rules are deemed equivalent, companies from Japan and other third countries will have to file an extra set of financial reports to satisfy market watchdogs in the EU, an expensive process that could hurt Japanese firms doing business in Europe.